Why the King v. Burwell Ruling Is Good News for Millions of Americans

Inmaculada (Inma) Hernandez, PharmD, PhD, is an assistant professor at the University of Pittsburgh School of Pharmacy. Her research program is built at the intersection of pharmaceutical health services and outcomes research, pharmacoepidemiology, pharmacoeconomics, and pharmaceutical policy. Specifically, she is interested in the real-world use and outcomes of oral anticoagulation therapy in stroke prevention in atrial fibrillation, on the use of large data sets, advanced data mining techniques, and comparative effectiveness research to predict and compare outcomes of medications, and on value-based health insurance and health services delivery.

King v. Burwell was one of the lawsuits that challenged the tax subsidies received by individuals purchasing health coverage through federally-run exchanges in the 34 states that have not implemented their own exchanges. Because the Internal Revenue Code section 36B explicitly states that subsidies would be provided for “qualified health plans offered in the individual market (…) and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act or (...),” the plaintiffs argued that those who purchase insurance through federally-run exchanges would not qualify for the tax subsidies. Coordinated by the Competitive Enterprise Institute, this lawsuit was originally filed on behalf of Virginia residents. Although in July 2014 the US Court of Appeals for the Fourth Circuit ruled unanimously for the government, the US Supreme Court announced in November 2014 that it would hear the case. With a 6-3 majority, the Supreme Court ruled in favor of the administration last Thursday. Claiming that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them” and that “subsidies are necessary for the federal exchanges to function like their state exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid,” the Supreme Court gave its much-deserved consideration to the rationale behind the creation of exchanges rather than to the mere language used in the provision.

As a result of this ruling, individuals and families purchasing qualified health plans through the federally-run exchange will continue to receive their premium subsidies and cost-sharing reductions. This Supreme Court decision is good news because for millions of Americans, a ruling in favor of the plaintiffs would have had the following consequences:

Between 4.6 million and 9 million people would have lost their subsidies for an amount of around $28 billion in 2016 alone, and around $340 million over the next 10 years.

Without subsidies, over 80% of individuals no longer eligible for subsidies would have had to pay more than 8% of their income in health insurance and, thus, would have been exempt from the individual mandate penalty. (Note: The individual mandate is a provision of the Affordable Care Act that dictates that all individuals must have health coverage, unless they are undocumented immigrants, incarcerated, American Indian, have a religious objection, or have to pay more than 8% of their income for insurance. With the current subsidies, only around 3% of uninsured people eligible for subsidies in the states with federal marketplaces are estimated to be exempt from the individual mandate.)

Because (a) individuals would have lost their subsidies and (b) they would have been exempt from the individual mandate penalty, many would have opted-out of insurance. The consequences would be:

Because healthier individuals would have been disproportionately more likely to drop out of coverage, premiums would have increased to reflect the increased average risk of the individuals enrolled. Specifically, it was estimated that premiums would have increased between 35% to 47% following a potential ruling of the Supreme Court in favor of the plaintiffs.

As a result of the loss of subsidies, and increase in premiums, the number of uninsured would have increased. With the current provisions, the number of uninsured Americans has been estimated at 18 million for 2016. However, the number of uninsured people in 2016 could have reached 26 million if subsidies had been eliminated.

The Supreme Court ruling, therefore, is nothing but good news for those 4.6 to 9 million Americans in 34 states that will continue to receive subsidies to purchase health insurance plans through the federally-facilitated exchange. Even if I still can´t come to terms with such a weak argument making it to the Supreme Court (in a country with over 300 million people, I expected the Supreme Court to have more important things to do than hear such a puerile argument), it is good to know that common sense finally prevailed.